Archive Monthly Archives: March 2012
Commercial Mortgage Appraisal
“Commercial Mortgage Appraisal Watch Outs And Considerations”
Commercial mortgage appraisals are a critical part of getting a commercial property in place.
And depending on the scope of a given commercial property appraisal and the activity or demand for commercial appraisals in a given area during a given time period, the completion of a commercial property appraisal can take several weeks or even months to complete and can add considerable time to the commercial mortgage application process.
A commercial real estate appraisal can also come with a significant cost to complete, so time and money are both going to potentially come into play.
As a result, there are a number of watch outs and considerations for anyone applying for a commercial mortgage.
First of all, most mortgage lenders will have their own accepted or approved list of commercial property appraisers. Any appraisal presented to them that was completed by an accredited or non accredited appraiser from outside their list will not be considered.
This creates a bit of dilemma in that some property owners, knowing the amount of time that it can take to get a commercial appraisal completed, will want to get an appraiser working on their property prior to even applying for financing.
This is truly a risk in that if the appraiser selected is not on the approved list of the lender you’re trying to work with, the appraisal may have to be redone which is going to take time and money. That being said, if you have a good idea of the lender or lenders that you are likely going to be working with or applying with, you can do some checking and find the appraisers that are approved on all or most of the targeted lenders’ lists.
A second challenge with commercial mortgage appraisals is that they are going to have to be made out directly to your targeted lender, even though you are paying for them. As a result, the commercial lender will get a copy of the appraisal, but you may not. This is something you will want to discuss in advance with any lender you want to apply with if you will want a copy of the appraisal for your own use and potentially have one or more copies of the appraisal sent on to other lenders if your financing request is not approved.
The lender may also have an agreement with their approved appraisers that any appraiser they receive from a given appraiser cannot be re issued for a period of time, say 60 days. This restricts the amount of shopping you can do with a completed commercial appraisal.
Third, it can be a good idea to find out how busy the appraisers in your area are at a given time. There can be periods of time when commercial activity is high that it may take a month or more before an appraiser can even start working on your file. Because there are significantly fewer certified commercial appraisers than residential, the demand for appraisal services can outstrip the available supply, and when you further limit your choices to lender approved appraisers, there can be a considerable back log in getting the work completed.
Of all the aspects that can go into a commercial mortgage, the commercial real estate appraisal can be the most difficult to accomplish and can add the most time to the overall process, which speaks to the need to closely manage this requirement, even before you formally apply for commercial property financing.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Mortgage Prepayment Disclosure
“Mortgage Prepayment Disclosure
Set To Get Clearer”
By November, 2012, all mortgage lenders governed by the department of finance are going to have to provide more clear and concise mortgage prepayment penalty information which will need to include how the calculation will be made, calculation sheets for borrowers to utilize, where to find the different inputs into a calculation, and even how to prepay the mortgage without incurring a prepayment penalty.
This move has been promised for the last two years by the department of finance and now its finally coming into practice.
While greater transparency is welcomed by all mortgage holders, some would argue that the finance department has not gone far enough and in fact should require all mortgage lenders to follow a completely standardized prepayment penalty policy and calculation.
The argument against this is that each lender has a different set of costs they are trying to protect themselves against, and forced to follow a single prepayment policy, there could end up being higher rates in the market place and a reduction in the number of different mortgage programs that exist in the market today, which effectively is a reduction of choice to the consumer.
And while a standardized prepayment policy and payment is not likely to be legislated any time soon, the implementation of more transparent prepayment language is definitely a step in the right direction and will provide consumers not only with better tools to avoid prepayment penalties, but to also make better decisions with respect to selecting a mortgage in the first place as prepayment penalty is typically one of the least focused on an understood aspects of a mortgage contract.
But even with greater disclosure, potential prepayment calculations can still be difficult to understand fully. Which is why its always good to work with an experienced mortgage broker who can help you compare and fully understand the potential prepayment penalty that you could be facing with different mortgage options you are considering.
There can at times be a trade off between rate and prepayment in order to meet your preferred mortgage repayment strategy, so its definitely a good idea to go through the exercise of fully understanding this item before signing up for any mortgage program.
If you would like to better understand your prepayment options for a mortgage you have right now, or for a mortgage you are looking to get in place, I suggest that you give me a call so we can work through the lender’s prepayment policy and calculation together and help you determine which course of action makes the most sense for your situation.
Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh
Private Mortgage Pricing
“Private Mortgage Pricing Is Based On Risk And Speed”
Private mortgage pricing tends to be a combination of risk and speed for most private lenders.
Some private lenders will require a higher cost of funds and as a result, they must gravitate to the area of the market that will provide that type of return.
On the other end of the spectrum, there are private lenders that are very risk averse and will provide funds at rates close to what banks and institutional lenders will provide, but the risk needs to be very low and the the borrower needs to be prepared to go through a longer due diligence process.
Private mortgage pricing is an often miss understood area of private money lending.
The most common point of view is that private money is going to be priced at 10% or higher for first mortgages and 12% or higher for second mortgages.
And while this might be true in terms of the averages, there is a wide range of values around these numbers that can apply to a variety of funding scenarios.
If you have the time to go through the application process, and do not require a high loan to value ratio on good, solid, marketable property, the private mortgage pricing range is more likely to be in the 6% to 8% range for a first mortgage.
But if you’re in a hurry and need funds in a matter of days, then the pricing can get into the 12% to 14% range for first mortgages.
Every private lender also has their own unique way of looking at the market, pricing risk, and determining what they want to get for a return on any particular deal.
So the key here is finding the right fit for any one particular deal and being prepared for the pricing range the deal is likely going to fall into based on risk and timing.
The best way to accomplish private mortgage placement is through an experienced mortgage broker who can quickly assess your situation and put you in touch with private lenders that fit your needs.
Trying to locate private money on your own can not only be difficult to accomplish, it can also result in a less than ideal borrower/lender fit.
If you want to know more about private mortgage pricing for a current or future residential or commercial property financing requirement, I recommend that you give me a call so I can quickly go over your situation with you and discuss private mortgage financing options available to you.
Majors Moving To 2.99
“All 5 Major Banks Now Have A 2.99% Fixed Mortgage Rate Product”
Following BMO’s move to a 2.99% 5 year fixed mortgage rate, the other 4 major banks in Canada have announced a 2.99% fixed mortgage rate as well, but only for a 4 year term.
The news comes on the heels of news reports over the last couple of weeks that consumer spending is viewed by many economists as being too high, and that the housing market is slowing down.
Being that the mortgage market is a good portion of bank earnings, and is a highly competitive market, this latest move appears to be showing us that all the major banks are prepared to fight hard to maintain their market share and potentially grow it in the “A” business space by taking it away from smaller competitors that are not pricing as aggressively, at least not yet.
Even though BMO is offering an additional year on their 2.99% rate, there are differences in their total offering from what the other majors are offering over their 4 year programs.
So as always, when looking at the best mortgage option in the market place, you should be considering both rate and terms for any specific program and from there make an informed decision as to which one provides the best fit for your requirements.
Its hard to know how long these rates will last or what’s coming next in both the commercial mortgage and residential mortgage markets, especially with the continued pressure and uncertainty in the global financial markets.
But for right now, 2.99% is hot rate for consideration and is now becoming differentiated by the non rate program offerings of the 5 major chartered banks.
To find out more about determining which of the available 2.99% fixed rate mortgage programs are the best fit for your current financing requirements, please give me a call so we can go over your situation together and review each of the programs in detail in order for you to be in a position to make the best decision in the time you have to work with.
Commercial Site Development Financing
“Commercial Site Development Financing Can Be Very Sensitive To Location”
Commercial site development financing typically will depend a great deal on the location of the development as well as the type and structure of the development.
For instance, here in Ontario, there is a lot of site development financing available, but most of it will not venture beyond the boundaries of the Greater Toronto Area or GTA.
The same is true in other parts of the country where construction financing sources tend to focus heavily on the major metropolitan centers.
The reasons for this are fairly obvious.
Within larger markets, the ability to successfully exit a project in the event of borrower default is going to be higher in a larger market than in a smaller one, all other factors being equal.
And when you have markets like Toronto, Vancouver, Calgary, and Edmonton where the real estate activity is high and and growing, there is likely going to be more opportunities not only for the borrower to be successful with their project through resale of lots, but also for the lender in the event that the project stalls out for some reason.
This is not to say that commercial site development financing cannot be secured in solid communities that are outside of the main population centres, but the process for locating proper financing and getting it in place can certainly be a lot harder to accomplish, taking more time and money to complete in many cases.
The sources of site development financing that will look at projects in more rural or less populated areas can also be hard to locate as many of them will work through broker networks when originating and placing development financing.
The challenges will even relate to locations where the population is at or near hundred thousand so its not safe to assume that just because the project is well designed and a good fit for the local market that it will be easy or straightforward to get the commercial site development financing you are looking for.
If you’re planning out a commercial site development project either for lot development for resale, or internal use, or you’re in the middle of a site development project that still has a financing requirement, I suggest that you give me a call so we can go through your requirements together and discuss different construction development financing options that may be available to you.